Correlation Between Company K and ECSTELECOM
Can any of the company-specific risk be diversified away by investing in both Company K and ECSTELECOM at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Company K and ECSTELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Company K Partners and ECSTELECOM Co, you can compare the effects of market volatilities on Company K and ECSTELECOM and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Company K with a short position of ECSTELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Company K and ECSTELECOM.
Diversification Opportunities for Company K and ECSTELECOM
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Company and ECSTELECOM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Company K Partners and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM and Company K is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Company K Partners are associated (or correlated) with ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of Company K i.e., Company K and ECSTELECOM go up and down completely randomly.
Pair Corralation between Company K and ECSTELECOM
Assuming the 90 days trading horizon Company K Partners is expected to generate 2.13 times more return on investment than ECSTELECOM. However, Company K is 2.13 times more volatile than ECSTELECOM Co. It trades about 0.01 of its potential returns per unit of risk. ECSTELECOM Co is currently generating about -0.03 per unit of risk. If you would invest 621,833 in Company K Partners on May 5, 2024 and sell it today you would lose (92,833) from holding Company K Partners or give up 14.93% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Company K Partners vs. ECSTELECOM Co
Performance |
Timeline |
Company K Partners |
ECSTELECOM |
Company K and ECSTELECOM Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Company K and ECSTELECOM
The main advantage of trading using opposite Company K and ECSTELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Company K position performs unexpectedly, ECSTELECOM can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ECSTELECOM will offset losses from the drop in ECSTELECOM's long position.Company K vs. InfoBank | Company K vs. DB Insurance Co | Company K vs. Shinhan Financial Group | Company K vs. Incar Financial Service |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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